TPP: Cutting 18,000 Tariffs? So what?

· October 16, 2015

16

October 2015

Michael Froman, the US Trade Representative, is promoting the Trans-Pacific Partnership (TPP) to a skeptical Congress with the lead claim that the deal will cut 18,000 tariffs. The implication is that the result will be American growth. But he does not claim US growth because that would be a lie.

The best way to think about the "18,000 tariffs cut" claim is that, at best, it does not matter.

Tariffs are a small part of the deal. The TPP is mostly about global re-regulation outside the scope of national legislatures and parliaments. Copyright, pharmaceutical, financial services food safety and many other laws are taken from Congress' hands.

The US International Trade Commission (USITC) is tasked with projecting the future economic impact of trade agreements before Congress votes upon them. The Commission's reports are usually wrong on an astounding scale. In a report on the future impact of the South Korea trade agreement, which was implemented in 2012, the USITC projected a substantial benefit for US exports which exceeded any increased exports. Instead, our trade deficit with South Korea has grown more than seventy percent.

The big selling point back then was tariff cuts. However, we can see that it did not matter then, and it sure won't matter now.

My organization sent a letter earlier this year to USITC pointing out how past optimistic projections have misled Congress in trade agreement debates. We made a simple request: please upgrade your analytical methods to improve accuracy. The USITC refused to respond.

When Mr. Froman claims 18,000 tariff cuts in the TPP, reporters dutifully transcribe the statement without questions. But Congress and the public must be smarter than that. How much are those tariffs cut? Are the cuts immediate or staged over ten or twenty years? Will the cuts actually provide meaningful market access or are they illusory? Which countries are cutting the most or least? If Brunei and Vietnam are cutting the most, we will not sell much to those minuscule markets full of poor people.

Will the tariff cuts provide net exports for the US, as opposed to past tariff cutting deals? How is this one different? Can the tariff cuts be negated by currency undervaluation or the raising of border applied consumption taxes by those countries?

The US Department of Agriculture projected no growth from the TPP in a report last year. Even the most dedicated, ideological TPP cheerleader organizations can only find a potential 0.4% US economic growth, which will take ten years to achieve. That is a rounding error quickly swamped by, well, almost any other small economic event.